{"id":17325,"date":"2019-01-31T08:09:09","date_gmt":"2019-01-31T08:09:09","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=17325"},"modified":"2019-01-31T09:15:48","modified_gmt":"2019-01-31T09:15:48","slug":"bt-end-2018-on-uk-fttp-and-gfast-broadband-cover-of-2-6m-premises","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2019\/01\/bt-end-2018-on-uk-fttp-and-gfast-broadband-cover-of-2-6m-premises.html","title":{"rendered":"BT End 2018 on UK FTTP and Gfast Broadband Cover of 2.6m Premises"},"content":{"rendered":"

BT<\/a> Group has released their results to the end of December 2018 (Q3 – 18\/19 financial), which reports that Openreach<\/a>’s FTTP<\/a> and G.fast<\/a> based “ultrafast broadband<\/em>” (100Mbps+) UK ISP network has grown its coverage from 1.97m premises passed to 2.6m in the last quarter. Take-up of FTTP<\/a> is 29.9% and G.fast<\/a> just 0.88%.<\/p>\n

As usual we’ve seen a number of developments from the BT<\/a> Group over the past quarter, although the main ones have reflected Openreach<\/a>’s most recent roll-out announcements for their hybrid-fibre G.fast<\/a> technology (here<\/a>) and “full fibre<\/em>” FTTP<\/a> lines (here<\/a>); the latter also included news of a plan to hire 3,000 extra engineers during 2019.<\/p>\n

On top of that Openreach<\/a> recently reached a deal with their ISP customers regarding Ofcom<\/a>’s forthcoming scheme of automatic compensation<\/strong> for broadband faults and delays (here<\/a>) and they’ve just started a trial of the future self-install service for G.fast lines (here<\/a>).<\/p>\n

The operator has also had to defend against rival operators, which appear to be concerned that Openreach may hamper “full fibre<\/em>” (FTTP) competition in the commercial market (here<\/a>). But separating such concerns from the dynamics of natural commercial competition in urban areas will be a tricky argument to win.<\/p>\n

Elsewhere BT<\/a>’s sibling mobile operator EE<\/a> has announced the first 16 UK cities for their commercial 5G<\/a> roll-out (here<\/a>) and confirmed the removal of Huawei’s kit from their core network (here<\/a>). Sadly during the quarter EE<\/a> was also fined \u00a36.5m by Ofcom<\/a> for overcharging customers (those on discounted deals) who wished to leave their contracts early (here<\/a>).<\/p>\n

Financial Highlights – BT’s Quarterly Change<\/strong><\/span>
\n* BT Group revenue = \u00a35,982m (up from \u00a35,908m)
\n* BT Group profit after tax = \u00a3594m (up from \u00a3503m)
\n* BT Group total net debt = -\u00a311,114m (down from -\u00a311,895m)<\/p><\/blockquote>\n

The previous quarterly results from BT were particularly interesting because they revised the operator’s assumptions about clawback \/ gainshare via the government’s Broadband Delivery UK<\/a> roll-out programme. More take-up in BDUK’s areas means more public money that can be returned and reinvested by councils further down the road, which will be used to help “superfast broadband<\/em>” cover to reach 98% of the UK by 2020 (example<\/a>).<\/p>\n

The prior update included a new “life-time view<\/em>” of BT’s BDUK linked contracts, which predicted that take-up of their “fibre broadband<\/em>” (FTTC<\/a>\/P) network within those could eventually reach 61% and this might result in up to around \u00a3712m being returned to help reinvest in further network coverage. Today’s report doesn’t appear to change that.<\/p>\n

BT Group’s Capital expenditure<\/strong><\/p>\n

Capital expenditure for the nine months to 31 December 2018 was \u00a32,810m (2017\/18: \u00a32,571m) including network investment of \u00a31,514m, up 17% due to increased investment in FTTP and the increase in our base-case assumption for customer take-up under the Broadband Deliver UK (BDUK) programme announced last quarter, partly offset by lower mobile investment as the Emergency Services Network (ESN) passed the peak deployment phase.<\/p>\n

Other capital expenditure components were up 2% with \u00a3683m spent on customer driven investments, \u00a3494m on systems and IT, and \u00a3119m spent on non-network infrastructure. Excluding the effect of the increase in our BDUK base-case assumption, capital expenditure was \u00a32,641m.<\/p><\/blockquote>\n

Separately it’s worth remembering that BT stopped providing customer figures for their own consumer broadband service earlier this year (i.e. covering up for some declines), although it’s noted that 70.5% of BT’s own retail broadband ISP base now takes a “superfast broadband<\/em>” connection (up from 68.4% last quarter and mostly via FTTC<\/a> \/ VDSL2<\/a>), while just 0.6% are on their “ultrafast” (FTTP\/G.fast) services (up from 0.4%).<\/p>\n

Openreach’s Network Coverage<\/strong><\/span><\/h3>\n

The following table offers a very useful breakdown of fixed line network coverage and take-up by technology. Being Openreach the totals given below apply to all ISPs on their national UK network combined (e.g. BT, Sky Broadband<\/a>, TalkTalk<\/a>, Vodafone<\/a> etc.).<\/p>\n

\"openreach<\/p>\n

As remarked earlier, FTTP is delivering extremely good take-up, although this has to be weighed against the fact that it’s slower to deploy and is a much more established technology (i.e. both physically and in the eyes of consumer familiarity). In fact we may even see take-up fall away as Openreach’s roll-out will ramps up significantly over the next year.<\/p>\n

By comparison G.fast is clearly struggling and a take-up of 0.88% is abysmal for a service that will soon cover 2 million premises. On the other hand it’s significantly faster to deploy (the true commercial roll-out only began last year) and at present is not being widely promoted like slower packages (i.e. few people are familiar with it). Some significant ISPs, such as Sky Broadband<\/a>, have yet to even offer the service.<\/p>\n

On this point we note that G.fast take-up more than doubled over the last quarter, so while it might be low it is growing at a considerably faster pace than FTTP. On this point it probably doesn’t help that most of the major price comparison websites aren’t promoting any Openreach based FTTP or G.fast packages, although that’s largely the fault of ISPs.<\/p>\n

As usual our own ISP Listings<\/a><\/strong> page has been displaying both ultrafast broadband products for a long time because we don’t force ISPs to pay a commission in order to be shown.<\/p>\n

Gavin Patterson, CEO of BT Group, said:<\/strong><\/p>\n

“We have continued to deliver consistently against our strategic objectives in a tough market, resulting in another sound quarter of operational and financial performance.<\/p>\n

In Consumer we launched the next version of our converged consumer offering, BT Plus with Complete Wi-Fi. Following successful trials in London we announced our plan to launch 5G<\/a> in 16 UK cities in 2019. Openreach accelerated its FTTP commissioning and has now passed 890,000 premises. We are ready to expand our FTTP programme up to and beyond 10 million premises if the conditions are right.<\/p>\n

Our overall outlook for the full year remains unchanged, with EBITDA around the top end of our guidance for FY 2018\/19. We continue to expect regulation, market dynamics, cost inflation and legacy product declines to impact in the short term before being more than offset by improved trading and cost transformation by our 2020\/21 financial year.<\/p>\n

I am handing over the business with good momentum behind its ongoing transformation programme and wish my colleagues all the best for the future.”<\/p><\/blockquote>\n

Crucially this will be the last set of quarterly results for Gavin as Philip Jansen<\/strong> will be taking over as the new Chief Executive from 1st February 2019, which is always exciting because a new boss tends to mean a new direction and big changes.<\/p>\n

As we’ve said before, our expectation is that the new CEO will be followed by the long-awaiting announcement of Openreach’s final strategy or agreement for delivering 10 million FTTP premises by around 2025 (expected to cost c.\u00a33bn to \u00a35bn). On the flip side such a plan is almost certain to worry the operator’s rivals, which will find themselves in an even more aggressively competitive commercial environment.
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